Issuing Shares At A Premium

Issuing Shares At A Premium

Issuing shares at a premium

Where capital is raised by the issue of either preference or ordinary shares, the issued capital of the company is increased only to the extent of the par value (nominal or original value) of the number of shares issued. Example: £1m shares par each, fully paid, issued at £30 per share. Capital raised would be ,CI-5m. The increase in the company's share capital would be limited to Lim. The balance of £500,000 would be placed in the capital reserve account known as 'share premium account', and not form part of the company's share capital.

Authorised and issued

Authorised capital means the limit of capital which the company is empowered, by its Memorandum of Association, to issue. The Memorandum of Association fixes the amount of capital (authorised, nominal or registered) and defines the objects of the company and the activities in which it may trade. The Articles of Association, however, are the regulations governing the internal management and the relations of the members (i.e., shareholders) with the company.

The authorised capital can only be increased by a majority resolution of shareholders.

Issued capital means the amount which has actually been subscribed by the shareholders and may be the same as or less than the authorised capital.



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